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The Internal Revenue Service may have let thousands of people last year claim $ 57 million in tax deductions they shouldn’t have received, according to a federal watchdog.
AMERICANS SHOULD AVOID FILING TAX RETURNS ON PAPER IN THE MIDDLE OF BACKLOG, SAYS IRS
An audit by the Treasury Inspector General for Tax Administration revealed flaws in the IRS’s handling of qualified tax relief established as part of Donald Trump’s 2017 tax reform program.
The law allows some owners of “pass-through” businesses – such as S corporations, partnerships and sole proprietorships – to deduct up to 20 percent of their business income from their personal income tax returns.
The Inspector General’s office said it found 12,980 returns filed last year claiming about $ 57 million in “potentially erroneous” deductions from business income, although the IRS has developed more a dozen rules to spot these faulty deposits.
The Jan. 13 report was heavily redacted, and details of what was wrong with the returns and how the IRS handled them appeared to be blacked out. But he said “no action was taken by the IRS during processing to deal with these potentially erroneous claims.”
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The auditors suggested that the IRS could have detected incorrect deductions by taking a closer look at returns that were “flagged.” For example, IRS officials ended up denying qualifying business income deductions from about 85% of the 68 returns in the 2018 tax year reviewed, the report says.
But IRS official Eric Hylton noted that the 13,000 or so returns the IG office selected represented roughly 0.1% of the 9.4 million returns that claimed deductions from income. enterprises. More than 95% of those returns were properly filtered by the IRS, he added.
The tax agency rejected three of the inspector general’s five recommendations to improve his ability to verify deductions while agreeing or partially agreeing with the other two, according to the report.
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Pursuing additional compliance measures “would reduce the overall revenue potential” by diverting resources from other IRS activities, Hylton argued.
“The IRS has determined that taking the suggested actions during processing activities could harm taxpayers and increase risk,” wrote Hylton, the commissioner of the IRS’s Small Business / Self-Employed Division, in a response to the IRS. audit report.
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